Goldman Sachs downgraded Garmin Ltd. (NASDAQ: GRMN) from Neutral to Sell with a price target of $46, implying downside of 14%. Analyst Simona Jankowski said the stock's P/E was "rich" and warned of decelerating fitness growth, along with downside to consensus estimates.

"The stock is +44% ytd (vs. a 10% increase in CY16E EPS) and is trading near a peak P/E of 21X (30% above its 5-yr. median). We expect shares to underperform from here as the key Fitness/Outdoor segment slows from 29% growth in 2Q16 to 7% in 2Q17E (the stock has a 71% correlation to yoy growth in Fitness/Outdoor, which is 45% of revenues/54% of profits)," said Jankowski. "We also see $0.07 downside to 4Q Street EPS largely owing to a 14th week of opex that seems under-modeled. We view the stock’s 21X P/E as rich relative to its 1% FY15E-17E EPS CAGR."

Discussing catalysts, the analyst said, "We see three key catalysts over the next few months: 1) In September, we expect high profile product launches from competitors, including Fitbit (with the Flex 2 and Charge 2 activity trackers) and Apple (Watch refresh). 2) While fitness products were a hot seller over the past two holiday seasons, this holiday season they will see increased competition for consumer wallets from a few new emerging consumer electronics categories, including VR headsets, home assistants and drones, which are expected to drive $1bn in incremental sales in the US alone this year, equivalent to a quarter of the Fitness category. 3) Garmin will face the step-up in direct and share-ofwallet competition during a period of increasingly difficult comps, as it laps its own strong product cycle driven by commercializing its Elevate wristbased heart monitor technology over the last three quarters (4Q15-2Q16)."

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